Push to slash GST exemption for online purchases

Revenue-starved state governments are agitating for the federal government to give priority to slashing the $1000 Goods and Services Tax exemption for imports as a new report shows they could get an extra billion dollars a year collectively if the loophole, which benefits online buying, were closed.

The retailer-backed report says the move could save 33,400 jobs and bring up to $12 billion in retail sales back to Australian sellers. NSW Treasurer Mike Baird said he was determined to have a lower threshold implemented this year.

“It is moving at a pace more akin to a Yes, Minister episode than actually moving towards a resolution this year," he said. “I’m determined to ensure that it’s not just discussions [that are] finalised in 2013, but agreement on the model and the implementation."

Mr Baird will table the “critical" issue at a meeting of the nation’s treasurers on Wednesday and ask the federal government to bring forward action. He said he had personal assurance from federal Treasurer Wayne Swan that it will be prioritised this year.

In December, the government rejected the recommendation of its low value parcel processing taskforce to cut the threshold for international mail to $500 almost immediately. Instead, it set up a committee of Treasury, Customs, Australian Taxation Office and other bureaucrats to prepare business cases and draft plans to improve import processing.

Assistant Treasurer David Bradbury said a decision could not be made until that work was done and “costs associated with any possible changes have been determined".

The committee is due to report in the second half of this year, which leaves little, if any, time to pass an amendment before the September election.

Australian National Retailers Association chief executive Margy Osmond said it was not an issue any government could afford to ignore.

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ANRA commissioned a report on the possibility of Australia adopting a streamlined version of the United Kingdom’s system: collecting GST from registered overseas suppliers or from local purchasers.

The Ernst & Young report, due for release next week, will show that slashing the $1000 threshold to just $20 would bring $997 million to state governments in the 2014-15 fiscal year, if introduced by Christmas.

That would grow to $1.64 billion by 2020-21, accounting for an increase in ATO collection costs of $47 million by that year.

It would bring between $7.2 billion and $12 billion in retail sales back to Australian retailers in 2014-15 and boost gross domestic product by up to $6.5 billion in the same year, the report says.

Under the model, foreign suppliers like Amazon could voluntarily register with the ATO to collect GST when the item was sold. For items sold by unregistered suppliers, Australia Post or a freight operator would hold the goods until the customer paid the tax plus a handling fee it set. Ernst & Young claims legislative changes could happen by July and systems upgrades within a year.

“It’s being done around the world – Japan, Singapore, New Zealand, Canada," Ms Osmond said.

“It’s a cost-efficient method and this isn’t money that would go to the retailers – this is money that would go to the states for schools and roads.

Apart from GST, Mr Baird will raise concerns over a “standstill on infrastructure" and demand creative thinking and national co-operation at the meeting.

Victorian Treasurer Michael O’Brien will use the opportunity to call for change to the way the $50 billion of GST collected each year is carved up between states.

“The distribution system is ripping Victorians off, and I will make the case very strongly for a fairer system at the Treasurer’s conference," he said.

Mr O’Brien complained that Victoria was propping up other states.

“While Victorian revenue remains on track, any significant reduction in GST revenue from Canberra means that difficult decisions will need to be made in the upcoming budget if we are to keep the state’s finances strong."

Victoria – like Western Australia, Queensland and NSW – wants distribution based on population rather than the current complex equation that tries to equalise state services. The government’s GST distribution review panel last year recommended distribution on a per capita basis but in the long term and accompanied by compensation for the poorer states.